Freddie Mac is preparing a second transaction designed to transfer credit risk on mortgages that have been modified in order to avoid default.
Seasoned Credit Risk Transfer Trust, Series 2017-1 (SCRT 2017-1) is a securitization seasoned modified re-performing first lien mortgage loans that Freddie purchased from pools of mortgage bonds that it insures. Each loan was modified and is currently held in the government-sponsored enterprise’s retained portfolio.
Several senior tranches of notes to be issued in the deal are unrated but are guaranteed; a single mezzanine tranche, the $30.6 million M1, which is rated Ba3 by Moody’s Investors Service. The most subordinate notes are unrated.
The loans used as collateral are divided into two groups: Group H is comprised of 3,620 first-lien loans that were subject to step rate modifications, and have a weighted average updated FICO score of 695and a weighted average (WA) current loan-to-value Ratio (LTV) of 86%. The total unpaid principal balance of Group H loans is $952,062,176, which includes $215,880,826 of non-interest bearing deferred principal balance.
Group M is comprised of 741 first-lien loans that were subject to fixed rate modifications, and have a WA FICO of 669 and a WA current LTV of 99%. The total unpaid principal balance of Group M mortgage loans is $163,047,826, which includes $33,018,114 of non-interest bearing and deferred principal balance.
Select Portfolio Servicing is the servicer.
Moody’s expected losses for Group H and Group M are 9.5% and 11% respectively in its base case scenario.